place on one of the islands where they are throwing some wild parties. The Forestry Department warned them that that was not to be done and if they were heard again, they would be canceled. It occurred again and they were notified and they were canceled out.

But I think if that situation occurs, I think generally the Forestry Service notifies you, gives us one warning at least.

Mr. O'NEAL. They try to work with the permittees?

Mr. SMITH. Oh, yes; I think so.

Mr. O'NEAL. And these things are rare?

Mr. SMITH. That is right.

Mr. O'NEAL. But then in connection with this particular lake, the Forestry Service suddenly decided that they wanted to turn these islands over to public use.

Mr. SMITH. Yes.

Mr. O'NEAL. Now, prior to that, had it been many years, say 15, 20, or 50 years, that there had been no cancellations at all?

Mr. SMITH. I would believe that is correct, Congressman. There was-in addition to the island, near some of the public camping grounds, as I understand it, one or two were canceled out to enlarge the campgrounds, and I think it is on Ledgewood Bay there were about five or six permit holders in there that have been notified they are going to cancel them clear out because they are going to put campgrounds there.

But, prior to last year, I had not heard of any that had been canceled out except for infractions of the restrictions that were placed upon them.

Mr. O'NEAL. Are the building sites rather scarce in that area?

Mr. SMITH. I do not believe so. In fact, Congressman, in our survey that we made there are miles and miles of shoreline there that could be provided for camps.

Mr. O'NEAL. Do you think the Forest Service could have used something else for-turn something else to public use?

Mr. SMITH. We feel so; yes.

Mr. O'NEAL. That is all. Mr. FOLEY. Off the record. (Discussion off the record.)

Mr. FOLEY. Back on the record.

Mr. Smith, one question before you leave. So again we can understand this, is it correct to say that part of the concern of the permit holders is that these increases proposed by the Forest Service are connected to terminable leases or terminable permits, and that the permit owners might feel a little differently if they had some extended assurance of occupancy, but the combination of not knowing how long they are going to be allowed to continue on the land and not knowing when additional increases might be made is causing a good deal of insecurity in their use of the property?

Mr. SMITH. I think that is correct, and I think it detracts from the possibility of, if you want to sell, being able to sell. Yes. Mr. FOLEY. Thank you very much. We appreciate your testimony. Mr. SMITH. Thank you, gentlemen.

Mr. FOLEY. The next witness will be Mr. Dennis D. Swift, secretary of the Upper Columbia Timbermen Corp. Is Mr. Swift in the hearing room?

Mr. Swith is not here.

Mr. MIKALSON. I believe I was to represent them.

Mr. FOLEY. All right; would you come forward, sir?

Mr. Mikalson, would you state your name and position?

STATEMENT OF ARTHUR MIKALSON, PRESIDENT, ARDEN LUMBER CO., REPRESENTING UPPER COLUMBIA TIMBERMEN, INC.

Mr. MIKALSON. I am Art Mikalson.

Honorable Congressman McMillan, members of the Forest Subcommittee, and interested guests, I am Arthur Mikalson, president of Arden Lumber Co. Today I am appearing here to represent the Upper Columbia Timbermen's Association. We are an organization formed primarily to promote better management of our great natural resource, timber, whether it be owned by public or private industry.

We private timber owners believe in paying our fair share of taxes and our commissioners and assessors in Stevens County see that we do. Now, I am sure that the Congress wanted the Government to pay its fair share in lieu of taxes, otherwise they would not have passed a law in 1907 giving the counties 25 percent of revenue from the sale of timber.

I am not sure that the present management of our forests know, or are to blame, for the chiseling program that has evolved to keep the counties from getting their 25 percent. First, because the Forest Service had a strong lobby in Congress and the counties had none, it was easy under the guise of silviculture in 1930 to get the Knutson-Vandenberg Act passed by Congress. This act allowed the Forest Service to retain some of the money from timber sales to improve the site. This was fine, except it came out ahead of the counties' 25-percent. Now, this worked so well that the managers of the Forest Service decided, "We might as well make the logger build some superhighway," so this was added to the program. This actually took quite a bite out of the counties' share. On the Roger Mountain sale, which our company logged, the prospectus left $1 to be divided between the county and U.S. Government.

I doubt very much if many of the Commissioners knew that this was going on. Anyway it worked so well, and nobody complained, that it was easy to devise another method to get money out ahead of the counties' 25 percent.

put

Now it used to be that, on each sale, the operator was required to put up a deposit to guarantee he cleaned the woods properly after logging. If he did so, he got his deposit back. Nowadays we are required to pay for brush disposal on each sale, yet we have to do the job. We lop the tops to 4-inch diameter and clean up our skidways and loading areas. We get no refund anymore, so this becomes a cost of timber.

On the last prospectus of a sale I received, brush disposal is listed at $2.95 a thousand board feet, or about 75 cents a thousand is being taken away from the counties by the brush disposal method.

I have presented an outline of how bureaucracy works, ever increasing their take. To overcome this, we propose that we go back to the original intent of Congress and give the counties 25 percent of the tim

ber value at the time of the sale. Then the Forest Service can do what they please with the other 75 percent.

In closing, if any of you are interested in specific examples, I would be glad to give them to you.

Mr. FOLEY. Thank you very much, Mr. Mikalson.

The gentleman from South Carolina.

Mr. MCMILLAN. I do not believe I have any questions.

Mr. FOLEY. The gentleman from Georgia.

Mr. O'NEAL. I understand you to say, on the Roger Mountain sale, after the K-V deposits were taken out, the county and the U.S. Government only got $1.

Mr. MIKALSON. That is right.

Mr. O'NEAL. Well, Mr. Little had not heard about your case when he said something about 96 percent. [Laughter.]

Mr. MIKALSON. No; that is right. And the road was built, private timber had been logged out with board, and we logged the sale out over the old road before we built it, and it did not go anywhere.

There was a lookout up on the mountain but there was no need for the road at all. It was just a matter-I do not know why. I do not think they know either.

Mr. O'NEAL. Is this due to previous abuses?

Mr. MIKALSON. Well, it is just due to trying to get ahead of the counties is all I can see.

Mr. O'NEAL. You do?

Mr. MIKALSON. Yes.

Mr. O'NEAL. You think it was deliberate?

Mr. MIKALSON. I think it was. And I think that the $2.95 brush disposal is deliberate.

Mr. O'NEAL. That is all.

Mr. FOLEY. Mr. Mikalson, could you tell me again-tell the committee again what group of logging operators are represented in the Upper Columbia Timbermen's Association?

Mr. MIKALSON. Well, we are mostly loggers and lumber and mill interests.

Mr. FOLEY. In the area of northeastern Washington?

Mr. MIKALSON. Yes.

Mr. FOLEY. And Idaho.

Mr. MIKALSON. Yes; mostly Stevens County.

Mr. FOLEY. Mostly Stevens County.

Mr. MIKALSON. We have some in Ferry County, too.

Mr. FOLEY. And you are presenting this statement on their behalf. Mr. MIKALSON. On their behalf.

Mr. FOLEY. Do you feel-if you can answer this question, I would be interested-do you feel that most of the timber operators and mill owners would favor some program similar to this one of a gross 25 percent to the counties?

Mr. MIKALSON. Yes, I do, and I think it would be just as efficient as giving them an extra 10 cents an acre.

Mr. FOLEY. Thank you very much.

The next witness will be Mr. Eugene Taylor, president of the County Assessors of the State of Idaho.

Mr. Taylor?

STATEMENT OF EUGENE TAYLOR, PRESIDENT, IDAHO STATE ASSOCIATION OF COUNTY ASSESSORS

Mr. TAYLOR. Chairman Foley, other members of the panel, I am Eugene Taylor, assessor of Latah County, Idaho, and president of the Idaho State Association of County Assessors. I have been asked to include the school and highway districts within my county in the list of supporters of my statement.

Even though financing our respective subdivisions of local government is out of the realm of responsibility of county assessors, we are nevertheless interested in most all phases of taxes. Since the values we established are the basis for tax levies, we are normally held accountable by the public for the rise or fall of taxes. With this in mind, we are greatly concerned when any of our taxing districts are short of funds to carry on their necessary functions. Many of said districts find their value, and therefore income, is owned and managed by the Federal Government. Since there is a Federal subsidy for children students of persons employed on federally owned property, it is sometimes felt that this is in lieu of property taxes. However, the same subsidy is paid where there is no revenue derived to the Government from Government-owned property within that district. What we cannot visualize is what these districts owe our Government that other districts do not owe. Therefore we feel we are paying more than our share for the services we receive from Government.

Since the proposed bill is designed to give to our taxing districts 25 percent of the gross receipts, before any deductions, from the sale of timber, we feel this is more in line with the tax paid by private

owners.

There are numerous information sheets put out to prove certain points of tax responsibility, such as, the amount of tax paid by an average acre of forest land in a county. The discrepancy comes from not showing the amount of tax paid on the volume of standing timber on which tax is paid when in private ownership. Therefore any comparison which may be presented is to prove a point, and may not be a complete picture of the total tax procedure.

For example, in Clearwater County, Idaho, where there are numerous acres of virgin timber, the tax would average, at 75 mill levy, $1.732 per acre. In Latah County, my home county, 0.453 cents per acre. Some counties combine their reproduction land and timberland thereby showing a lesser value per average acre. Therefore the return to the counties from Federal lands is not as high as the private participation.

We must maintain local services for all the people in all areas of our State. In order to tdo this, we must have revenue from all of the wealth in our area in order to provide those services.

Thank you.

Mr. FOLEY. Thank you very much.

The gentleman from South Carolina.

Mr. MCMILLAN. I do not believe I have any questions.

Mr. FOLEY. The gentleman from Georgia.

Mr. O'NEAL. This matter that we are dealing with has sometimes been referred to as payments by the Federal Government in lieu of

taxes. Would you say that what it amounts to is really payments in lieu of income taxes rather than ad valorem taxes, because it is based on the income that the Federal Government receives from this rather than on the value of the property?

Mr. TAYLOR. That would be primarily true. The thing that all of our taxing districts find themselves--the position they find themselves in is that they have to carry on a continued service, but the revenue that is derived from thse forest lands is strictly on the basis

Mr. O'NEAL. Well, I suppose that the owner of private property, say vacant property, would like to have the same sort of arrangement that the Federal Government has, would he not?

Mr. TAYLOR. That is right.

Mr. O'NEAL. Thank you, sir.

Mr. FOLEY. Thank you very much, Mr. Taylor. If there are no further questions, we appreciate your statement very much.

I think I will go off the record for a minute.

(Discussion off the record.)

Mr. FOLEY. The next witness will be Dr. Albert Ayars, superintendent of schools, city of Spokane, appearing for the Washington State School Directors Association.

It is a great pleasure to welcome you, Dr. Ayars.

STATEMENT OF DR. ALBERT AYARS, SUPERINTENDENT OF SCHOOLS, SPOKANE, WASH., REPRESENTING THE WASHINGTON STATE SCHOOL DIRECTORS ASSOCIATION

Dr. AYARS. Thank you, Tom, and gentlemen of the committee. I want to thank you for the opportunity to make a very brief statement in behalf of the Washington State School Directors Association.

The most that I would have to say would merely be in support of statements which have already been made regarding the division of income from Federal forest lands with the various States and particularly Washington State.

I am sure that you are aware that the public schools nationally are meeting with a public harshness of attitude so far as payment of local taxes for support of schools is concerned.

You may have read an article in one of the recent Wall Street Journals summarizing the national attitude toward local taxes for support of schools.

In this State the State percentage of payment for support of our local schools has declined consistently for the last several years. As a matter of fact, the support has dropped from 65 percent of the support of public schools in the last 5 years to 55 percent currently.

This makes the income in lieu of taxes increasingly important to us as time goes by in that the only recourse the local school district has to make up its income is the property tax.

We in the Spokane schools have recently been victims of a defeat of our annual levy for support of our schools and of having to run another special election May 9 in an attempt to secure enough funds to operate our schools next year.

Now, it is the contention of the Washington State School Directors Association that 25 percent of the net income of national forest lands going to the State for division among the various counties is not ade